The Allowance Method for Uncollectibles Is Used by a Firm

question 50

Multiple Choice

The allowance method for uncollectibles is used by a firm

• A)when it knows that at the time of sale, it will experience some reduction in future cash flows.
• B)when the firm can estimate with reasonable precision the amount of reduction in future cash flows at the time of sale.
• C)to reduce reported earnings in the period of sale to the amount of the expected net cash collections.
• D)all of the above.
• E)none of the above.

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Definitions:

Non-competition Clause

A provision in a contract that prohibits a party from entering into competition with another party for a certain period of time and within a specific geographical area.

Liquidated Damages

A predetermined amount of money that must be paid as compensation for failure to perform under a contract.

Penalty Unenforceability

The legal concept that a penalty clause within a contract may not be enforceable if it is deemed excessively punitive rather than a genuine pre-estimate of loss.

Liquidated Damages

A predetermined amount of money that must be paid as compensation for failure to perform certain obligations of a contract.